Global Markets Rebound and Oil Plunges as U.S. and Iran Enter Talks Over Strait of Hormuz

U.S. stock futures rallied on Sunday evening while crude oil benchmark prices plummeted over 5%, following an operational pause in military strikes between Washington and Tehran that opened a window for negotiations to restore maritime traffic through the Strait of Hormuz.

Energy markets responded immediately to the diplomatic opening. West Texas Intermediate futures sank 5.44% to $84.45 per barrel, while international benchmark Brent crude dropped 5.25% to $91.70. Conversely, stock index futures moved sharply higher, led by a 1.28% jump in Nasdaq futures, while S&P 500 futures gained 0.80% and Dow Jones Industrial Average futures rose 337 points, or 0.65%. Spot gold advanced 1.15% to $4,118 per ounce.

In Asia, South Korea’s Kospi index climbed 1.1%, or 74 points, buoyed by major announcements from domestic semiconductor leaders.

The financial relief comes as U.S. President Donald Trump and Iranian leadership acknowledged active diplomatic engagement after nearly two weeks of persistent bombardment. Regional diplomacy is also underway through bilateral discussions between Tehran and Oman, focusing on a framework that would allow Iran to regulate transit through the Strait of Hormuz under reduced maritime restrictions.

The Strait of Hormuz remains the world’s most critical oil transit bottleneck, handling roughly a fifth of global petroleum supply. While Washington and regional allies are resistant to any agreement establishing formal Iranian control over the waterway, U.S. options remain constrained as domestic and global crude inventories hover at dangerously depleted levels.

The current diplomatic pause follows weeks of intense escalation. Despite the deployment of additional U.S. combat troops and aviation assets to the Middle East, forty days of full-scale conflict alongside thirteen days of targeted air operations failed to force open the blocked sea lanes.

Strategic limits appear to have driven the administration’s shift. Axios reported that Adm. Brad Cooper, commander of U.S. Central Command, advised halting air strikes after determining the bombing offensive had hit the limit of its operational effectiveness. Simultaneously, Chairman of the Joint Chiefs of Staff Gen. Dan Caine warned in private briefings that while major military action could be restarted, expected Iranian retaliation would rapidly drain U.S. air defense interceptor reserves to critical thresholds, according to The New York Times.

The decision to pause operations on Friday represents a dramatic pivot from earlier in the week, when an Iranian strike killed U.S. service members in Jordan. That attack crossed a strategic boundary previously set by President Donald Trump, triggering an aggressive stance before military realities intervened.

Adding complexity to the regional picture, Ukrainian forces executed a strike against an Iranian supply vessel in the Caspian Sea. The extension of hostilities into northern maritime routes has introduced fresh leverage into the multi-lateral negotiations.

Lowering energy costs is particularly vital as the Federal Reserve prepares for its upcoming monetary policy meeting. Central bankers face internal divisions over whether to hold interest rates steady or implement another rate hike to combat persistent inflationary pressures, a debate complicated by recent energy price volatility.

The outcome of the Fed’s deliberations will directly impact technology sector valuations, which have faced headwinds as Wall Street scrutinizes elevated capital expenditure on artificial intelligence infrastructure.

Market scrutiny will intensify this week as corporate earnings reports arrive from Microsoft and Meta Platforms on Wednesday, followed by Apple and Amazon on Thursday. While Alphabet exceeded market revenue expectations last week, its financial disclosure revealed negative free cash flow driven by massive AI-related capital expenditures.

Despite investor caution regarding infrastructure outlays, operational demand for semiconductor hardware remains intense. SK Group Chairman Chey Tae Won revealed that AI firm Anthropic requested custom memory chip supplies from SK Hynix to support in-house processor production. Concurrently, Samsung Electronics secured a contract valued at over $200 billion to manufacture chips for Broadcom as hardware providers rush to build out global AI capacity.